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Renzi vows crackdown on tax dodgers

'Cheats to pay back the working man'

21 March, 16:33
Renzi vows crackdown on tax dodgers (By Christopher Livesay) (ANSA) - Rome, March 21 - Premier Matteo Renzi on Friday vowed to rein in tax dodgers, who every year evade payments on over 130 billion euros in income. Speaking after his first EU summit in Brussels, the new premier said that finally "those who have never paid will have to pay," in order to "pay back citizens who have paid for the crisis due to nearsighted politicians who are far from the needs of the people".

Renzi vowed to implement "innovative methods" to cross check financial records digitally. The problem of tax evasion is well publicized and a constant and long-running problem for governments.

They have intensified in recent years as governments have struggled to meet their obligations in the midst of a double-dip recession that began in 2008-2009.

On the heels of that came a second crisis which reached depths in the past two years not seen since World War II.

That was further aggravated by austerity measures to avoid a Greek-like economic meltdown when interest rates on Italian bonds rose alarmingly high.

The hard medicine forced on Italy to try to regain its financial footing included program cuts and tax hikes that businesses say have crippled their operations while stunting economic growth and job creation.

Recession in Italy, the eurozone's third-largest economy, began to show tentative signs of easing only in the second half of last year.

The economy remains fragile with a tepid growth outlook, although things may be improving with Renzi, a business-friendly reformer, at the reins. On Friday, Italian retailers' association Confcommercio revised its growth forecast from 0.3% to 0.5% in 2014, and 0.9% in 2015. Those numbers could go up even more if Renzi follows through on cutting over 12 billion euros in income and business taxes, Confcommercio said. However, the forecast is weaker than the national inflation rate that averaged 1.2% in 2013, and if unemployment remains at the record-high 12.9%, it suggests that the incentives to avoid paying out cash to tax collectors will remain weak.

According to the finance police, last year they discovered 8,315 evaders who concealed income or did not even file a tax return on 16.1 billion euros in revenues.

About 15.1 billion euros that were not reported to tax authorities came from international income including "transfers of convenience" to tax havens as well as foreign-based companies' income earned in Italy that is subject to taxation here.

The finance police said much of that was uncovered by working cooperatively with agencies in other countries.

Almost five billion euros were dodged by Italians avoiding the value-added tax alone, and more than 13,000 people were found to be working "in nero" or outside the legal system, meaning their work was not reported and they paid no tax.

By not cracking down on tax evasions, particularly on value added tax, Italy lost 36.1 billion euros in 2011, giving it the worst record in the EU on VAT collection, according to a study by the European Commission.

France had the next worst record, losing 32.2 billion euros to tax evasion in 2011, followed by Germany with 26.9 billion euros lost.

The study says reasons for tax evasion include fraud but also bankruptcies and defaults, and the eurozone economic crisis which left more and more companies in such dire straits they cannot pay taxes owed.

Still, improving anti-fraud measures would "certainly help Italy to bridge the gap" between value-added taxes owed and what is actually paid to the government, said a spokesman for EU Taxation Commissioner Algirdas Semeta.

Across the 28-member European Union, lost revenue in 2011 totalled 193 billion euro, equal to 1.5% of GDP.